Delaware Life Debuts Its First Annuity
November 6, 2013 by Linda Koco
The wondering is over. Delaware Life has debuted its first annuity, a multi-year guaranteed fixed annuity called Pinnacle MYGA.
The debut brings to end speculation about whether the newbie would or would not become an active player in the annuity marketplace this year.
The questions have been circulating ever since the company was established as an annuity and life carrier in August. That happened in conjunction with the purchase of certain annuity and life insurance businesses of Sun Life Financial by Delaware Life Holdings. (The annuity piece of the deal included Sun Life’s domestic U.S. variable annuity, fixed annuity and indexed annuity products).
Approximately 500 former Sun Life employees joined the new insurer, according to Delaware Life, but annuity professionals in the field have been wondering if the insurer might not do much with the business for a while other that run that book.
Some guessed that the new carrier just might decide to wait out the challenges of the prolonged low interest rate environment, and decide later whether to go into the annuity business in a proactive way.
Bone tired
Such a waiting game would mean more frustration for producers who are bone tired of the industry-wide restrictions in annuity design and pricing, carrier competitiveness and annuity capacity that followed in the wake of the Great Recession. This is pent-up-demand time, and these producers are looking for markets that are willing to expand or emerge.
Questions about whether Delaware Life would step up to the plate gained some steam from the fact that Delaware Life Holdings is owned by certain shareholders of Guggenheim Partners (but not by Guggenheim Partners itself). That ownership has triggered buzz about whether those unknown shareholders would view their new acquisition primarily as a sideline investment or as a business to develop and grow.
This week’s rollout of the company’s first product may help allay some of that concern.
The carrier has not been selling new products up to now, executive vice president Ken McCullum said in an interview with InsuranceNewsNet. That’s because, although it acquired about 450,000 policies representing more than $40 billion of in-force business as well as Sun Life’s talent and technologies, it did not acquire products that were actively being sold. “Sun Life had closed its products for new business for over a year,” he explained.
This makes the MYGA rollout an important event for the carrier. It is a signal the company is looking for business.
Distribution will be through five “select” independent financial marketing organizations in 47 states, McCullum said. That distribution arrangement puts the product into the independent agency channel, but interested producers will need to be affiliated with one of the “select” marketing organizations in order to sell it, he said.
Some product features
The commission-paying policy is a single-premium deferred annuity offering guarantee periods of three, five, seven or 10 years. The current interest rate varies by guarantee period. As of Nov. 5, the interest rates ranged from 2 percent for the three-year period on up to 3.5 percent for the 10-year.
The contract allows annual 10 percent penalty-free withdrawals beginning in year two. Withdrawals over that amount will be subject to surrender charges (which decline over the guarantee period) and market value adjustment, if applicable. (The surrender charges will be waived if the amount withdrawn is to meet required minimum distribution requirements from the Internal Revenue Service.)
At the end of the renewal period, the owner can make withdrawals or surrender the policy with no surrender charges or market value adjustment during a 30-day window, or they can renew for another guarantee period. Renewals would be at then-prevailing rates, with a new surrender charge period and market value adjustment.
The issuing companies are Sun Life Assurance Co. of Canada (U.S.) of Wellesley Hills, Mass., in all states except New York, where the issuer is Sun Life Insurance and Annuity Co. of New York. The companies are members of the Delaware Life, not affiliates with Sun Life Financial, but the issuing company names say Sun Life because Delaware Life has licensed the Sun Life names and marks.
Minimum deposit is $10,000 for nonqualified annuities and $5,000 for qualified.
The general account is being managed by Guggenheim Partners Investment Management, McCullum said. That firm has deep fixed income expertise and it runs the general accounts for several other insurance companies, he said.
Delaware Life president David Sams is predicting the product will appeal to “retirement-oriented investors looking for the peace of mind of guaranteed interest rates, tax-deferred growth and lifetime income options.”
Linda Koco, MBA, is a contributing editor to AnnuityNews, specializing in life insurance, annuities and income planning. Linda can be reached at linda.koco@innfeedback.com.
